Three Key Ratios For Investors

if you could only have four ratios to evaluate a company what would they be? This is a fun question that is popular in investing circles. For a laugh I’ll take my shot at it, what would you pick?

1) Current Ratio

Current Assets / Current Liabilities

Why?

This ratio keeps track of the company’s ability to pay its short term debt. If a company doesn’t have safety money to deal with debt then they might not be in business tomorrow and I don’t need any of that.

2) Dividend Yield

Annual Dividend Per Share / Price Per Share
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CenturyTel Stock Review

CenturyTel, Inc., together with its subsidiaries, is an integrated communications company engaged primarily in providing an array of communications services, including local and long distance voice, Internet access and broadband services. The Company operates in 25 states located within the continental United States.

Why We Are Reviewing

• is currently sporting an 8% dividend.
• CenturyLink is a dividend aristocrat.
• is soon to be a member of the fortune 500.

What I like about their story

CTL is a telco, most investors tune out at that point as the overwhelming consensus is that VOIP has, or will kill, the traditional phone. Centurylink appears aware of this reality and has taken a few steps to remain a healthy business:
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Bristol-Myers

This article originally appeared on The DIV-Net May 15 2009.

This week we are reviewing Bristol-Myers Squibb as a possible stock acquisition. To do so we will use the Buffett four filters we discussed in a previous article.
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Stock Analysis Methanex

Originally published on: Div-Net
After much searching I found a stock screener for Canadian stocks (more on this in another post). I was able to assemble a Graham style screener with the following criteria:
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• Exchange TSX
• P/E less than 15
• Dividend Yield > 3.5
• Average EPS > 33%
• Revenue > $550M
• Current Ratio > 2
• Price/Book Ratio less than 1.5

Building a Simplified Graham Value Stock Screener

I did a search and could not for the life of me find a link to a prebuilt Google screener for Graham’s value investing system. So lets quickly build one:

Through the Graham series we said we would only consider companies that:
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1. Had a P/E of less than or equal to 15.
2. A book value of greater than or equal to 0.01.
3. A price to book value of less than or equal to 1.5.
4. A current ratio of more than or equal to 2.
5. Earnings Per Share Growth rate on average of greater than or equal to 33% over 10 years.

Insider Trading December Report

Every day I pull a list of the insider traders then I shorten the list to be only buys done by roles that have a proven track record (see my previous post for a little on this). Finally I run an evaluation of the companies based on some of the ratios that Graham used to find companies that are cheap (See my earlier series on this).

This is just the start for me though after a company reaches this level it is worthy enough for me to look at it further not necessarily.
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Buy a Company with a Future (Current Ratio) (Session 5)

Current ratio is an important one; it shows us how the company will survive in the short term. As I mentioned earlier there are reasons why the company is currently cheap our job is to figure out why and also to build in a safety margin to make sure they are going to survive the reason they are so cheap.
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Buy on the Cheap (Price/Book Ratio) (Session 4)

If you made it through price to earnings ratio, price to book ratio will be a piece of cake.
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